2004 (8) TMI 407 - HC - Companies Law

Summary

Issues:
1. Distribution of claims to ex-workers and financial institutions under section 529A of the Companies Act, 1956.
2. Jurisdiction of the Official Liquidator in a case where Debt Recovery Tribunal (DRT) is involved.

Analysis of Issue 1:
The case involved objections filed by Indian Overseas Bank against the report of the Official Liquidator for the distribution of claims to ex-workers and financial institutions under section 529A of the Companies Act, 1956. The Official Liquidator had funds amounting to Rs. 7,00,50,000.00 for distribution, with claims from Industrial Financial Corporation of India (IFCI), Indian Overseas Bank, and ex-workers totaling Rs. 15,46,17,964.00. The Official Liquidator proposed various actions for disbursement, including declaring a dividend for secured creditors and ex-workers, dispensing with claims of unsecured creditors and contributories, issuing notices, encashing F.D.Rs., and opening a new Dividend Account. Indian Overseas Bank objected to the report, citing its own pending recovery suit and the involvement of the DRT in the matter.

Analysis of Issue 2:
Indian Overseas Bank argued that the Official Liquidator lost jurisdiction once the DRT was involved in the recovery of loans. The bank relied on section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, which confers exclusive jurisdiction on the Tribunal and the Recovery Officer for debts payable to banks and financial institutions. The bank referenced a case law, Allahabad Bank v. Canara Bank, which emphasized the exclusive jurisdiction of the DRT in such matters. However, the court analyzed the provisions of the RDBFI Act, 1993, and section 529A of the Companies Act, 1956, noting that both contained the expression "notwithstanding anything." The court concluded that if the DRT realized the amount, distribution would be as directed by the Recovery Officer, and if the sale proceeds were with the Official Liquidator, distribution should be made under the directions of the Company Court. Ultimately, the court rejected the objections of Indian Overseas Bank, vacated the interim order, accepted the Official Liquidator's report, and allowed compliance within two months.

In conclusion, the High Court of Uttaranchal addressed the distribution of claims under section 529A of the Companies Act, 1956, and clarified the jurisdiction of the Official Liquidator in cases involving the DRT. The judgment upheld the authority of the Company Court in overseeing the distribution of funds based on the nature of realization, either by the DRT or the Official Liquidator, ensuring proper compliance with legal provisions.